On November 5, the US House of Representatives passed the landmark Infrastructure Investment and Jobs Act, which carves out $65 billion for broadband-related initiatives and allocates $42.5 billion to the states for broadband infrastructure improvements, kicking off an unprecedented government-funded high-speed internet buildout. Under the legislation, expected to be signed shortly by President Biden, the funding can be used for any technology that meets the 100Mbit/s/20Mbit/s downstream/upstream speed thresholds. But it is clear fiber is the preferred access technology.

This fiber buildout will have a profound impact on the quality and availability of world-class broadband service for millions of Americans and small businesses living on the wrong side of the digital divide. Perhaps just as importantly, the fiber "surge" will change the dynamics of US broadband competition – with new market entrants joining forces with rural providers to disrupt the status quo.

Starting with the Connected America Fund (CAF) and the Rural Digital Opportunity Fund (RDOF), federal fiber spending already had a solid foundation of over $20 billion – some of it already put to work. However, with additional funding through the American Rescue Plan, which has at least $20 billion allocated towards broadband upgrades and the Capital Project Fund, which allocates $10 billion, added to the $42.5 billion from the Broadband Equity, Access, and Deployment Program (BEAD), a subset of the Infrastructure Investment and Jobs Act, the level of funding will potentially exceed the $70 billion estimated by the Fiber Broadband Association required to cover 90% of US customer locations. Based on cost and ROI estimates, it is likely that the last 5% to 10% of locations will be served using other technologies – most likely a combination of low-orbit satellite and fixed wireless access.

While the digital divide has traditionally been framed as a residential access issue – particularly with home-based Internet connectivity being so important to effectively work from home – the hardships many small and medium-sized businesses have faced due to the pandemic have put business broadband in the spotlight. Increased fiber broadband availability will have a positive impact on the ability of small businesses to evolve into more efficient, competitive and productive digital-first operations. While greater availability of fiber is a slam dunk win for small businesses, what will this fiber surge mean for internet service providers?

To help answer that question, Independence Research LLC, recently conducted a survey of 500 IT decision-makers representing a cross-section of US small and medium-sized businesses. The study looked at some of the big questions that will impact the US competitive market for broadband services, including How much Internet speed is "enough" for small businesses?

When compared with previous studies conducted over the past five years, we see that the speed target continues to move upward, but slowly. The Gig speed threshold is not yet a "must have" – but 100 Mbit/s+ is now where competitive broadband begins. (Please see the following chart.) Upstream speed requirements are slightly lower – but comparable, and more fiber-based offerings will play to the technology's symmetric strength, putting a greater emphasis on upstream speed from a marketing perspective – whether real-world application usage requires that level of upstream bandwidth or not...

Figure 1: SMB Internet Speed Demand

Increased fiber deployment will create a competitive dynamic fueled by smaller, established providers and new entrants made up of rural telcos, municipalities and co-operatives. Many of these players have struggled in the past, but robust funding for fiber expansion and the much lower technology threshold to support video (streaming) and voice (VoIP) services makes the business case significantly more attractive for these providers.

Another change will come from the competition between cutting-edge fiber-based passive optical networking (PON) broadband and DOCIS cable modem high-speed access. Today, cable is the dominant technology both in the consumer and small business markets and has held its own against well-established GPON fiber competition. However, fiber has been slowly closing the market share gap at its current level of availability, and a fiber buildout surge is certain to accelerate the pressure.

Additionally, the deployment of 10G PON capabilities will eventually flip the technology advantage towards fiber providers. Cable operators sticking with coax will need multi-gigabit, symmetric service based on DOCSIS 4.0 to be ready soon if they are going to effectively compete with the next generation fiber technology.

Other big questions the study tackles: